It is now well established that bone marrow contains a population of cells, marrow stromal fibroblasts (MSF's, which proliferate from colony-forming units, CFU-f), that have the potential to form bone/cartilage, adipose and hematopoiesis-supporting stroma. The phenotypic fate of these cells depends on the microenvironment (systemic and local factors) to which they are exposed. Consequently, these cells provide an excellent model system for determining the factors that regulate phenotypic expression, and for use in skeletal regeneration and repair. Current studies are identifying procedures by which these cells can be used for bone augmentation and in gene transfer. In addition, it is now apparent that these cells play a major role in controlling skeletal metabolism, and derangements in their function leads to disease, such as in fibrous dysplasia of McCune-Albright syndrome. Since the genetic mutation is known in this particular disease, it is now possible to address in mechanistic terms, how these mutations affect skeletal metabolism.